870 Holdings Ltd. v. The Queen, docket 2002-476(IT)G

Date: 20020618

Docket: 2002-476-IT-G

BETWEEN:

870 HOLDINGS LTD.,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasonsfor Order

Margeson, J.T.C.C.

[1]            The Respondent makes a motion before this Court for an Order dismissing the Appellant's appeal on the grounds that the Appellant did not file a Notice of Objection as required by section 169 of the Income Tax Act ("Act"). In essence, what is before the Court, is a relatively simple factual dispute, namely, whether or not the requisite Notice of Objection was filed within the time limited by the Act, which was 90 days from the day of mailing of the Notice of Assessment. In the year 1996, section 165 of the Act provided as follows:

(1) A taxpayer who objects to an assessment under this Part may serve on the Minister a notice of objection, in writing, setting out the reasons for the objection and all relevant facts,

. . . . .

    (2) Service. A notice of objection under this section shall be served by being addressed to the Chief of Appeals in a District Office or a Taxation Centre of the Department of National Revenue and delivered or mailed to that Office or Centre.

[2]            The Court shall deal with that dispute on the basis of the Affidavit of Laurie Elias filed and her cross-examination which took place before the Court. She was a Litigation Officer in the Canada Customs and Revenue Agency ("C.C.R.A.") in Vancouver, British Columbia. No evidence was adduced by the Appellant on this motion and he relied upon the cross-examination of Laurie Elias. The Appellant did not file any Affidavit in opposition to that deposed by the Respondent.

[3]            In the Affidavit, Ms. Elias deposed that she was employed as an officer in the C.C.R.A. in Vancouver, British Columbia and as such had a personal knowledge of the matters deposed to, save and except what is stated to be on information and belief, and where so stated, she verily believed them to be true. She deposed that she was in charge of the appropriate records of the C.C.R.A. relating to the Appellant (the "Records"), and had knowledge of the practice of the C.C.R.A.

[4]            She deposed that she had carefully examined and searched the records, and on the basis of her examination and search she stated that:

a) by Notice of Assessment dated March 9, 1998 the Minister of National Revenue (the "Minister") initially assessed the Appellant for the 1996 taxation year. Attached to the Affidavit as Exhibit "A", is a copy of the Notice of Assessment.

This Notice of Assessment bore the date of March 9, 1998.

b) as of April 24, 2002, the Minister had not reassessed the Appellant's 1996 taxation year.

c) as of April 24, 2002, the Appellant has not filed a Notice of Objection in respect of the 1996 taxation year.

[5]            Subsection 244(14) of the Act for the year in question provided:

For the purposes of this Act, the day of mailing of any notice or notification described in subsection 149.1(6.3), 152(4) or 166.1(5) or of any notice of assessment shall be presumed to be the date of that notice or notification.

[6]            Subsection 244(10) provided that:

An affidavit of an officer of the Department of National Revenue, sworn before a commissioner or other person authorized to take affidavits, setting out that the officer has charge of the appropriate records and has knowledge of the practice of the Department and that an examination of those records shows that a notice of assessment for a particular taxation year or a notice of determination was mailed or otherwise communicated to a taxpayer on a particular day pursuant to this Act and that, after careful examination and search of those records, the officer has been unable to find that a notice of objection or of appeal from the assessment or determination or a request under subsection 245(6), as the case may be, was received within the time allowed therefor, shall, in the absence of proof to the contrary, be received as evidence of the statements contained therein.

[7]            The Minister relied upon these provisions.

[8]            The officer admitted, on examination, that these Notices of Assessment were not kept by C.C.R.A. The expression, "reconstructed copy" of a Notice of Assessment, refers to a computer generated reproduction based upon the information stored in C.C.R.A.'s computer. She testified that the practice of C.C.R.A. is not to maintain paper copies of the Notice of Assessment in its files. She did not keep a copy of the original Notice of Assessment mailed to the taxpayer.

[9]            When shown Exhibit A-2, a copy of the original assessment, she admitted that this was not exactly the same as the "reconstructed copy" and that the Minister did not allow the deductions claimed. The witness could not say if the date of assessment on the records could be changed. She could not say if a meeting had been held with one of the officials of C.C.R.A. to discuss the date on the Notice of Assessment. She could not say if Bill Sulis, a person who worked for C.C.R.A., the Program Advisor in the Pacific Region, was responsible for determining whether or not the mailing could have been changed due to human intervention.

[10]          She also said that there was a problem obtaining records from the Post Offices. She could not say how C.C.R.A. received new mail and she could not say if the Minister's representative put the notice in the mail. She could not say if the notice was sent by registered mail and she did not think that the Minister received a record from the Post Office. Then she said she did not know. She could not say whether or not it was possible that there could be a different date on the Notice of Assessment than the copy sent out to the taxpayer.

[11]          She was referred to Exhibit A-3, which was a letter from the Appellant to C.C.R.A. dated June 12, 1998. She admitted that she had not seen that letter until it was brought to her attention by counsel last Friday. She admitted that the letters at Tab C from the Minister did not go to the issue as to whether or not an objection had been filed and it had never been indicated in any letter that the Appellant had not filed a Notice of Objection. The Minister continued to debate the merits of the assessment for over three and a half years and continued to review additional documentation submitted pertaining to the loss for that period. She did not see any record of the Minister's agents conversing with the Appellant with respect to the losses in dispute up to June 12, 1998. She agreed that a Notice of Objection could be made in the form of a letter but she never saw any and she was not aware of any.

[12]          In cross-examination she said that the Minister never indicated that there was a Notice of Objection filed and the reason for that was that the persons who would be involved at that time would be the auditors and they would not be concerned about dealing with an objection. There was no reference to an objection in any of the letters. "There is no objection letter in the file that I have reviewed."

[13]          In re-direct, she said that Exhibit A-3 was a response to the assessment.

Argument on behalf of the Respondent

[14]          In argument, counsel for the Respondent said that the issue brought up by counsel for the Appellant with respect to the date of the assessment is not of significance because there is no issue as set out in the Notice of Appeal about the date of the assessment. Further, there was no evidence of any manual intervention and there was no evidence that the Appellant, in his Notice of Appeal questioned the date of the Notice of Assessment. There is no obligation on the Minister to advise the Appellant of his rights to file an objection. There was nothing in the Appellant's questioning of the assessment to show that he even considered that he had filed an objection. The motion should be allowed.

[15]          There was no indication that the Minister granted an extension, understood that there was an objection: or did anything that the statute would require the Minister to do if there was an extension applied for. There was no contact before June 24, 1998. The first contacts were outside the 90 day period.

Argument on behalf of the Appellant

[16]          In argument, counsel pointed out under the provisions of subsection 165(6) of the Act:

The Minister may accept a notice of objection served under this section that was not served in the manner required by subsection 2.

Counsel referred to the letter of June 12, 1998 and said that the Minister had this in hand. This was in regard to the 90 day limitation period. The Minister may accept it as a Notice of Objection. There may be other letters that exist. There may have been other arrangements between the Minister and the Appellant's representatives to have the Minister accept the letter as a Notice of Objection. The letter of June 12th was only two days late. This was a trivial delay. Otherwise the Minister should have indicated to the Appellant that he would have to pursue other procedural remedies.

[17]          He argued further that there now appears to be a triable issue in this case with respect to the date of the mailing of the Notice of Assessment and other issues and the Appellant is entitled to amend the pleadings and have a full blown trial on them. There may be triable issues with respect to the date of mailing of the Notice of Assessment. They are entitled to know the answers to these questions and as to the Minister's records and procedures. The question of manual intervention is a triable issue that the Appellant is entitled to raise.

[18]          The motion is ill concerned; it can only be brought pursuant to subsection 58(3) of the Tax Court of Canada Rules (General Procedure) ("Rules"). Under that Rule, in order for the Court to make a determination on a question of law, the material fact unrelating to that question can be in dispute. Here we have several material facts in dispute. An order cannot be made at this time. It is up to the trial judge.

[19]          He initially argued that the case at bar presents a different situation than the case of Taylor v. R., 1999 CarswellNat 2014, [2000] 1 C.T.C. 2140 and Jones v. R., 2001 CarswellNat 879, [2001] 3 C.T.C. 2090, 2001 D.T.C. 411 as both of these cases involve situations where the Appellant had not pleaded in the Notice of Appeal that there was a valid Notice of Objection filed as the Appellant in this case did so in paragraph 6 of the Notice of Appeal.

[20]          In essence the argument was that in order for the Court to grant the motion sought in this case it would have to amend its Rules, because of the fact that the Appellant had alleged in the Notice of Appeal that he had filed a proper Notice of Objection and now the matter becomes a triable issue.

[21]          In reply, counsel for the Respondent said that the Appellant had asked the Court to speculate on a variety of issues that might be triable and yet had provided no basis for this. She referred again to subsection 244(10) of the Act and argued that there is a basis for the Court concluding that no objection was properly filed. She took the position that the application is in accordance with the Rules.

[22]          Further, she took issue with paragraph 7 of the Notice of Appeal which was an allegation that by letter dated January 3, 2002, the Minister confirmed the assessment. She indicated that this was merely a letter and was not a confirmation of an assessment.

Analysis and Decision

[23]          The Court is satisfied that the appropriate rule relating to this application is subsection 58(3) of the Rules. Under that Rule:

(3) The Respondent may apply to the Court to have an appeal dismissed on the ground that,

(a)      the Court has no jurisdiction over the subject matter of an appeal,

(b)      a condition precedent to instituting a valid appeal has not been met, or

(c)      the Appellant is without legal capacity to commence or continue the proceeding,

and the Court may grant judgment accordingly.

[24]          As indicated earlier, the position to be taken is that the motion should be granted because: "(b) a condition precedent to instituting a valid appeal has not been met," as a factual basis for the motion and this should have been well understood by the Appellant at the outset.

[25]          The case of Taylor, supra, was an application for an order pursuant to subsection 58(3) of the Rules quashing the Appellant's appeal for the year in question on the grounds, inter alia, that the Notice of Appeal filed on May 19, 1999 was not valid. The Appellant did not file a valid Notice of Objection with respect to that taxation year as required by subsection 169(1) of the Act. In essence, the same issue is before this Court.

[26]          Likewise in Jones, supra, the Respondent had applied to quash the appeal on the ground that the Appellant failed to serve a Notice of Objection to the assessment under section 165 of the Act and was therefore not entitled to commence the appeal under section 169 of the Act.

[27]          In the case of Jones, supra, the Respondent's application was supported by the Affidavit of an officer of C.C.R.A. The Affidavit was prepared in accordance to subsection 244(10) of the Act. The statement made by the officer was essentially the same as that in the present case where Ms. Elias said:

3. I carefully examined and searched the Records, and on the basis of my examination and search I state that:

a)       by Notice of Assessment dated March 9, 1998 the Minister of National Revenue (the "Minister") initially assessed the Appellant for the 1996 taxation year. Attached hereto as Exhibit "A" is a copy of the Notice of Assessment.

b)       as of April 24, 2002, the Minister has not reassessed the Appellant's 1996 taxation year.

c)        as of April 24, 2002, the Appellant has not filed a Notice of Objection in respect of the 1996 taxation year.

The only difference is that in Jones, supra, the Appellant relied upon his own Affidavit in which he stated that his Notice of Objection had been sent by ordinary mail. There is no indication from that case that the Appellant had pleaded that he had filed a Notice of Objection as the Appellant alleges in the case at bar, but that is basically the only difference.

[28]          This Court is satisfied that the Appellant can gain no better position in this case because he filed a Notice of Appeal in which he alleged he had filed a valid Notice of Objection. That is merely an allegation in the Notice of Appeal and it does not make it a fact, neither can it be considered as proof to the contrary of the statements made under subsection 244(10) of the Respondent's Affidavit upon which the Respondent is entitled to rely as evidence of the statements contained therein. The Court finds that this allegation is irrelevant on the motion before this Court.

[29]          It certainly was within the power of the Appellant to file an Affidavit to refute statements made in the Affidavit of the Respondent and to call evidence in support of his position that he had filed a Notice of Objection but he did not do so. He relied entirely upon cross-examination of the officer.

[30]          Consequently, two questions arise in the context of this motion:

1)         Was the Affidavit of Laurie Elias sufficient in that it fulfilled the requirements of subsection 244(10) of the Act in the absence of "proof to the contrary"?

The Court is satisfied that it does.

2)         Has the Appellant established evidence to the contrary?

The Court is satisfied that it has not, the essential elements of the Affidavit remain unimpaired.

[31]          The Court is not satisfied that the questions asked of Laurie Elias, in examination of her on her Affidavit, have done anything to question the validity of the Affidavit and certainly do not amount to proof to the contrary. Consequently, the Affidavit stands.

[32]          The questions asked of Laurie Elias and the answers given thereto do not relate to the issues as to whether or not the Notice of Objection was filed even though they may suggest that the original Notice of Assessment may have been different than the reconstructed one and that there could conceivably be a different date on the original Notice of Assessment than on the reconstructed one. This is not sufficient to make a triable issue as to whether or not a Notice of Objection had been filed.

[33]          As counsel for the Respondent pointed out, the Appellant is doing nothing more than asking the Court to speculate on a variety of issues. There is no basis for this. There was no issue in the Notice of Appeal with respect to the date of the assessment and in any event that matter is covered by the Affidavit.

[34]          Counsel for the Respondent argued that there was no evidence of manual intervention with respect to the assessment. There was no evidence of what the Appellant said or did that would allow the Court to conclude that he had filed a Notice of Objection.

[35]          As rightly pointed out by counsel for the Respondent, there is no obligation on the Minister to advise the Appellant of his right to file an objection. The Appellant had the right to continue the discussions with the Minister with respect to whether or not the taxpayer had incurred a non-capital loss in the amounts sought by the taxpayer in the year in question and the question as to the quantum of the non-capital loss carried forward from the years 1990 to 1992, as was suggested by the Appellant to the Minister at that time. The fact that the Appellant continued to carry on these discussions was not evidence that he had considered that he had filed a Notice of Objection, that the Minister had considered that he had filed a Notice of Objection or that he had filed a Notice of Objection. It is certainly not evidence that would rebut the statements made in the Affidavit filed on behalf of the Respondent under the provisions of subsection 244(10) of the Act.

[36]          It follows that judgment must be issued quashing the appeal. The Respondent shall have its costs.

[37]          Although it is not relevant to the determination of this motion, it may well be that the Appellant is not without a remedy in this case in light of the fact that other years have been successfully appealed and the same issues will be under consideration. And upon consideration of those appeals, appropriate application might be sought under the fairness package.

Signed at Ottawa, Canada, this 18th day of June 2002.

"T.E. Margeson"

J.T.C.C.

COURT FILE NO.:                                                 2002-476(IT)G

STYLE OF CAUSE:                                               870 Holdings Ltd. and

Her Majesty The Queen

PLACE OF HEARING:                                         Vancouver, British Columbia

DATE OF HEARING:                                           May 27, 2002

REASONS FOR JUDGMENT BY:      The Honourable T.E. Margeson

DATE OF JUDGMENT:                                       June 18, 2002

APPEARANCES:

Counsel for the Appellant: D. A.G. Birnie

Counsel for the Respondent:              P. Meneguzzi

COUNSEL OF RECORD:

For the Appellant:                

Name:                                Birnie & Company

        Firm:                                Barristers & Solicitors

                                                                                Suite 2433, Three Bentall Centre

                                                                                595 Burrard Street, P.O. Box 49116

                                                                                Vancouver, B.C.

For the Respondent:                             Morris Rosenberg

                                                                                Deputy Attorney General of Canada

                                                                                                Ottawa, Canada

2002-476(IT)G

BETWEEN:

870 HOLDINGS LTD.,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Motion heard on May 27, 2002, at Vancouver, British Columbia, by

the Honourable Judge T.E. Margeson

Appearances

Counsel for the Appellant:                             David A.G. Birnie

Counsel for the Respondent:                         Pamela Meneguzzi

ORDER

Upon motion by counsel for the Respondent for an Order quashing the appeal as the Appellant had not filed a Notice of Objection pursuant to section 169 of the Income Tax Act ("Act");

And upon reading the Affidavit of Laurie Elias, filed;

And upon hearing what was alleged by the parties and upon hearing evidence;

The motion is granted and the purported appeal from the assessment made under the Income Tax Act for the 1996 taxation year is quashed.

The Respondent shall have its costs.

Signed at Ottawa, Canada, this 18th day of June 2002.

"T.E. Margeson"

J.T.C.C.